The Marketing Strategies by the H&M Brand - Essay Example

?Running Head: Brand Design Brand Design [Institute’s Table of Contents EXECUTIVE SUMMARY 2 OVERVIEW 3 HISTORY 3 H&M LOGO 4 BUSINESS CONCEPT 4 SIGNIFICANT COMPETITORS 5 BRAND PERFORMANCE 6 MULTI-BRAND APPROACH FROM INDITEX 7 MARKETING MIX 7 Price 7 Product 8 Promotion 8 Place 8 MARKETING STP 9 Segmentation and Targeting 9 Diversification 9 Positioning 9 CRITICAL EVALUATION OF THE BRAND 10 SWOT Analysis 10 Strengths 11 Weaknesses 12 Opportunities 12 Threats 13 IMPORTANCE OF BRAND VALUE FOR THE BUSINESS 14 CONCLUSION 15 REFERENCES 16 EXECUTIVE SUMMARY The report illustrates the power of brand design on the company’s operations and its importance in marketing the product in the market. The brand selected for analysis is the famous Swedish Brand, H&M, which has stormed the international high street fashion. It highlights its emergence and international presence in the fashion retail market. It also illustrates the marketing strategies and mixes followed by the H&M brand. It also critically evaluates its internal strength, weakness, and brand power due to massive international presence. The key competitors are under analysis and comparison with H&M to evaluate its brand image significant for its international standing and business operations. OVERVIEW H&M (Hennes and Mauritz) group is a renowned retail designer specialising in fashion apparel and accessories for men, women and children wear. It is the second largest international fashion retailer after the Spanish brand Zara (Inditex). It is operated through leased retail stores, franchises and online catalogue stores with operations in Europe, Americas, Middle East and Asia. It has expanded internationally through network of franchise stores as well as catalogue sales. It offers affordable and chic high street fashion from children to teenagers and adults with wide variety of fashion apparel, footwear, accessories and cosmetics. It divulges the concept of fast fashion i.e. offering premium fashion at affordable prices while maintaining satisfactory quality. It has a distinctive global presence across 48 countries with 2,700 retail outlets covering 50 franchises, 48 Monki, 18 Weekday and 35 Collection of Styles (COS) stores. It has a workforce of almost 94,000 employees globally. The significant growth was captured by introduction of cosmetics and accessories in the fashion apparel market. It derives 90% of its revenue from overseas market, where Germany being the biggest at 27%. The online and catalogue sale is only offered in the European region (Datamonitor, 2011). HISTORY The history of the multi-national retailer dates back to Erling Persson in 1947 at Vasteras, who started the brand initially with Hennes dealing with women wear. In 1969, Erling Mauritz bought a menswear retail company, together Hennes and Mauritz AB founded H&M fashion house dealing with both men, and women wear products. It expanded the fashion business from Sweden during the late 1960s to Norway, Denmark, Switzerland, UK, Austria, Luxembourg, Netherlands and Germany. H&M is listed on Stockholm Stock Exchange since 1974. In spite of H&M Scandinavian origin, its expansion into British and European market was a major success in the late 1970s. The online store was inaugurated in 1988 with consolidation of men, women, teens and children under one fashion brand called H&M. It is operated and headquartered in Stockholm. It turned into a multinational retail fashion business by acquiring 40% stakes in Fabric Scandinavian, which deals with brands such as Cheap Monday, Monki and Weekday retail stores. It also inaugurated its first COS concept store in 2011 at Stockholm (Datamonitor, 2011). H&M LOGO The logo signifies the first letters of the founding members of the H&M group, Hennes and Mauritz. The brand logo illustrates a bold red colour with light cursive that depicts softer outlook. The red colour illustrates a vibrant and enthusiastic outlook that comprehends with the company’s creative fashion trends. The font size and colour chosen for the brand depicts the innovative fashion approach of the company. The red colour is a powerful watermark, which can be recognised from the distant and it creates impulsive pulsation for the brand. Following image depicts the illustration of the brand image (Jungberg, 2008). (Source: HM Group, 2012) BUSINESS CONCEPT The company is structured horizontally where the design and creative team works from headquarter to the production, specification and planning of the merchandise and the manufacturing of the product is outsourced from Europe, Asia and rest of the world. The buyers and the designers creates a diverse range of merchandises, manufacturing is outsourced while sales and distribution is functioned from individual sales unites depending upon the region. It outsources its product manufacturing from 700 independent suppliers across Europe and Asia. Numerous quality test such as chemical and laundry test are carried on the products by external laboratories on all the outsourced products. The finished product is then shipped through air, rail, sea or other distribution centres that are further carried to the local or regional retail stores (Datamonitor, 2011). The core identity of the brand is to promote fashionable apparel and accessories in the masses at affordable prices. Their core strategy revolves around fashion, which is disposable and chic that every person shopping at their store can find their personal style. The concept targets men, women, teens and children intriguing their fashion reflection from haute, modern and latest international trends. It also sells fashion magazine exclusive for H&M that illustrates various upcoming trends, customer tips for apparel and accessories and helping customers to visit their online stores if they fail to visit the retail outlet too often (Jungberg, 2008). SIGNIFICANT COMPETITORS It operates in the high street fashion market and the following competitors from the industry, such as Marks & Spencer Group plc, Zara, Gap Inc., Arcadia Group Ltd, Primark Stores Ltd and Fast Retailing, acclaim it. The most significant competitors in terms of market share and fast fashion are Zara and Gap Inc. (Datamonitor, 2011). Gap is an American based fashion retailer with international presence of 3,053 stores. It caters for women, men and children wear. Its brand strategy is massive international expansion, diversification towards accessories, personal care and electronic commerce line. It also outsources its production merchandises making it a horizontal integrated company as compared to H&M (Easey, 2009). It has previously focused more on its home market and it only accounted 15% of its sales revenue from international market. In contrast with H&M, that has a massive international expansion strategy to integrate its business unit globally. It has entered the international market largely through organic expansion as compared to franchising and joint ventures by H&M. It is ranked as the third significant multi-national fashion retailer in the world behind H&M (Euromonitor, 2009). Zara is the famous Spanish brand operated under Inditex. It has a significant international presence all over the world from Europe, Asia, America, Middle East, Asia, Australia etc. It is the world largest multi-national fashion retailer in the world known for its innovative design and fashion products to the shelves within 4 weeks only (Easey, 2009). It has a vertical integrated strategy unlike H&M and design, produce, manufactures all in one from its headquarters (Euromonitor, 2009), it is also distinctive for having a zero advertising policy as compared to H&M that invest heavily in large celebrity endorsements and marketing campaigns. It also delivers an elegant and mesmerizing fashion statement to its customer in the fast fashion market with lower production cost making it an affordable brand to its customers. It is therefore a major competitor for H&M in the home market as well as globally (H&M, 2012), BRAND PERFORMANCE H&M is known to be the second largest known brand in the area of apparels in strong competition with Inditex while staying abreast of Gap (H&M, 2012). The organization has maintained the strong sales growth in years 2008 and 2009 due to its strong performance in Germany (H&M, 2012). Competition between H&M and Inditex is increased but Gap has been the leading player of this game for its strong brand image (H&M, 2012). Strong brand image of the organization is attached with value and trendy collections designed by creative designers (H&M, 2012). The launch of Jimmy Choo collection in 2009 has proved its strong brand image with the evidence publicity and media coverage adding more value to its brand position in the marketplace (HM Group, 2012). H&M depends on operating stores in flagship locations in different cities for building its brand image (HM Group, 2012). The H&M brand is highlighted at the highest level of image as it was ranked at 21st position among hundreds (HM Group, 2012). MULTI-BRAND APPROACH FROM INDITEX In contrast to exclusive reliance on its brand, “Inditex adopted a strategy to build a vast brand portfolio including Dutti, Zara, and Pull and Bear” (Cant et al., 2009) An important competitive advantages resulting from this strategy of “being multi-brand is the ability of the organization to target a wide range of consumer groups with altered brands and products to bring differentiation” (Powers, 1991) The level of independence of the major brands is an “important aspect of Inditex while adapting the market conditions in a quickly manner” (Wilson et al., 1992). The company has soared revenues and profits every year. The revenue of $10 billion in 2004 rose to “$16 million by 2008. The revenue in 2010 increased by 7% since 2009 at $18 million while the profits increased by 13.9% as compared to 2009. The financial performance of the group has improved by year and a key integral part of its massive expansion globally” (Datamonitor, 2011). MARKETING MIX The marketing strategy followed by the H&M brand is discussed as below: Price H&Ms recognizes the reason of its popularity and it is the wide range of products by offering quality products to its consumers at cheaper prices. The designers of the organization design apparels that reflect trend and fashion with higher quality. H&Ms are capable of offering consumers the highest quality of products at prices that are economical for consumers. H&Ms are able to offer their products at lower prices due to the reduction of a supplier or retailer, who purchases the products for the organization and sells at higher rates to gain profit margins. The considered organization purchases the apparel fabrics in sufficient quantity directly from the suppliers (H&M, 2012). Product The wide range of products of the considered organization includes shirts, cardigans, jeans, jackets, handbags, jewellery, and other various numbers of accessories. The Reference USA Company report provides that H&Ms operate its business in North America, Europe, and Asia with its headquarters in Stockholm, Sweden. The organization has located its stores in cities generating higher profits all across the globe for generating maximum profits for the organization (Walter, 2010). Promotion The organization implements a promotional strategy, which includes “mobile marketing through SMS messages, celebrities, popular music artists, and charities” (H&M, 2012). The marketing plan of H&Ms does not possess the advertising strategy and for this reason, the organization should incorporate sufficient budget to target the teenagers and of early twenties consumers (HM Group, 2012). The organization should use Facebook to attract younger consumers and the organization should focus on their pricing strategy while considering the target market (Boyd & Walker, 1990). Place H&Ms should broaden the location stores all across the globe and towards the emerging economies. There should be a selection in every store that is committed in providing the fashionable accessories and apparels. It can keep the consumers interested in the brand while browsing through the website of the H&Ms. The organization is having more than twice in Europe but the USA has selected some stores over its east and west sides (Boone & Kurtz, 2011). The organization has its website in Europe, America and Middle East for the people of this country to attract towards the brand while building and maintaining its brand image (Pradhan, 2006). MARKETING STP Segmentation and Targeting The expansion of H&M group have catered for the consumer demands and business portfolio for segmentation and targeting various consumer groups. H&M customers are segmented by demographic, age and gender namely children wear, menswear, teens and women wear. The brand is vibrant, full of energy and promotes stylish and chic fashion trends, which advocates for the younger adults and teens aged between 15 to 25 years old. Teens both male and female are looking for latest trends in affordable prices and are recurring customers of the high street brand (Cant et al., 2009). H&M has also targeted the working woman who seeks new trends in fashion and eveningwear for leisure and work. Men contemporary apparel is targeted with a classical and sporty outlook, which divulges a trendy professional, or businessperson to respond towards H&M stores (Haberberg, 2007). Diversification The apparent accessories, body care and cosmetic units have resulted in diversification of H&M products in the market. It has targeted both teens and younger women for trendy accessories at lower pricing strategy. The concentration into niche market of plus size and pregnant women is also offered in the section according to the latest fashion trends and making it affordable for all age genders (Euromonitor, 2009). Positioning The brand is for the entire fashion savvy crowd who likes to update their fashion statements every season in affordable prices. H&M preferably addresses the lower and upper middle class customers who like to feel confident in wearing the latest fashion apparel within their budget although the upper social class finds H&M as trendy and inexpensive (Wilson et al., 1992). The global expansions of H&M business products and operations facilitate a strong position in the retail industry despite of severe economic turndowns and strength of US dollar against Swedish Knors. The product positioning is based on lower pricing strategy, with satisfactory quality of trendy fashion apparels in conjunction with its rival Zara. The changing economic climate and recession have also divulged H&M to be flexible in responding to customer’s taste and fashion apparels (Euromonitor, 2009). Source: (Kotler, 1999) The above figure depicts the strategic positioning of H&M along with Zara and Inditex brands within Fashion and Price constraints. CRITICAL EVALUATION OF THE BRAND SWOT Analysis The internal analysis of the brand configures towards focusing on high street fashion, which replenishes latest fashion every day, and promoting upscale quality fashion products at lower prices. Following SWOT analysis illustrates the potential threats and weakness faced by the brand in comparison to its major strength and opportunities provided. Strengths Fast Fashion Brand It is a reputed fast fashion brand that entices customers to visit the store for latest fashion trends for younger adults and fashion savvy crowd. It enjoys a favourable position in the high street market due to trendy and chic fashion apparel at lower prices, which are refreshed weekly with newer products. It has a massive customer awareness and style following consumers who attributes H&M as a style innovative brand at affordable prices (Pradhan, 2006). The strong brand recognition and association with high profile celebrity endorsements have created a massive awareness and desirability of H&M apparel and accessories as an upscale proposition at lower prices among the consumers. The group is less exposed to higher production or inventory levels due to expeditions of latest fashion trends. It helps in selling the merchandiser swiftly due to changing fashion trends and thus reducing the cost of production as well (Datamonitor, 2011). Revenue Growth It has reported a stronger sales growth since year 2010 and making the group as the world’s leading fashion retailer in terms of higher revenue margin. The speedy store expansions and online stores have contributed largely towards increasing higher revenue (Datamonitor, 2011). Massive International Presence It has a strong international presence through retail and online stores in Europe, U.S, Nordic and Asia pacific region. It has entered into developing markets such as China, Japan and south Asian regional markets that resulted in decrease in dependency on saturated markets. It has also helped to diversify their business risk due to wide spread new and emerging markets for replication of its business operations (Datamonitor, 2011). Weaknesses Higher Dependency on Outsourcing The group does not own its own factories for manufacturing of its products instead is heavily relied on approximately 700 outsourced suppliers. Disruption in supplier relationships and lack of control could result in poor or insufficient merchandises. It could also result in poor quality and delays in order fulfilment. The group is vulnerable for such conditions due to rapid changing market conditions and can strongly affect the brand‘s reputation and corporate image (Datamonitor, 2011). Opportunities Emerging Preference for Online Shopping The massive increase in e-commerce and electronic portal has increased online shopping by 19% all over the Europe since 2010. It has also accounted for 7% of the total retail spending by the European market due to improved internet technology and easy access to the online stores from anywhere in the world, just with a click. It has developed H&M exclusive shop online portal, which can help in enhanced customer experience for shopping of the desired products at ease. The higher demand of online shopping in emerging economies and expansion in different markets can also result in increased customer and revenue growth (Datamonitor, 2011). Demand for plus size Apparel There has been a substantial increase in plus size apparel in US by 27% to 54% since 2011. It is expected that plus size demand will further increase the overweight sizes by 60% and the market is expected to grow by 3.4 % in 2012. The British market marks 23.2% of the plus size apparel as overweight and obesity have risen in the current age. The retailers are offering more plus size varieties as the market is expected to increase by 6% of the total in 2011. The presence of only few plus size retailers creates massive opportunity for H&M brand to cater for offering latest trends and styles in plus sizes for strengthening of customer base in American and British Market (Datamonitor, 2011). Expansion in Emerging Economies The expansion growth in Asian markets such as China, Japan, South Korea etc. The swift economic development and rise in GDP rate have also increased the demand for consumer goods in the market. There have been reported increases in retail sales by 15% by 2010, which contributes to factors such as increase in population and disposable income for the retail sector. The diversification into new cultures and market can boost H&M’s revenue, customer base and product perceptions (Datamonitor, 2011). Threats Increase in Cost of Production The massive increase in cotton prices and raw material can adversely affect the production of merchandise. It could result in expensive cost of apparel, resulting in shift of prices to the customers. The shortfall in cotton is the basic reason behind higher cotton prices in the international market since 2008. It has limited scope for passing the cost to the customers due to its competitive advantage of price leadership that will further jeopardise the profit margins (Datamonitor, 2011). Decrease in Consumer spending in U.S and European Market The two integral markets for H&M have reportedly shortfall in consumer spending due to adverse economic conditions in the region. The volume of purchasing apparel and footwear in European region has decreased by 2.8% in 2011 as compared to 2010. The higher rate of unemployment and inflation is also a key factor in lower consumer spending on apparel and accessories. The strict financial market crisis and lower wage employment in U.S have also resulted in decline in consumer spending. H&M is known for offering discretionary products, which could have an adverse impact on revenues due to decline in demand of such items (Datamonitor, 2011). Higher Foreign Exchange Fluctuations It derives its revenue largely from European and US market that operates in Euro and dollar (US) but the group’s reporting currency is Swedish Krona (SEK). It becomes vulnerable to higher fluctuations of US dollar and Euro. It has a massive geographical presence all over the world, which also indicates the risk of higher fluctuations of foreign exchange rates of currencies in relation to the Swedish Krona (Datamonitor, 2011). IMPORTANCE OF BRAND VALUE FOR THE BUSINESS Brand value and core image of H&M is the influential and significant part of the business operations. Brand proclaims the aims, objectives, and core identity of the company. It facilitates the awareness of trendy clothes, vibrant and latest fashion trends all over the world. H&M has a reputation of association with famous international brands such as Jimmy Cho, and various celebrity endorsements such as Roberto Cavalli, Stella McCartney etc. for its marketing and promotion campaigns (H&M, 2012). This is the significant message conveyed to its customer base that celebrity association with a brand proclaims fame, style, elegance and social status. It not only increase brand awareness but also brand value for the fashion house. The hallmark practices and style statement of the brand is renowned all over the globe, which gives it a significant identity and adds goodwill and value to its core operations. The brand is massive and historical, which holds significant endorsements, latest fashion trends, international presence, and larger customer base all over the world (Daft et al., 2010). CONCLUSION Conclusively, H&M is a significant brand in the fashion retail industry that divulges latest chic fashion trends for its customers in affordable prices. It has generously expanded worldwide and it has entered new markets for diversification of economic and market risk and increased its revenue and customer base. It needs to invest heavily in advance technology and online portals in future due to increase in online shopping and franchising for entering into new markets. The brand equity and customer perception is an important factor for its massive popularity (Euromonitor, 2009). REFERENCES Boone, E. L. & Kurtz, L. 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